Fact Pattern 36-1A

question 71

Multiple Choice

Fact Pattern 36-1A
Dean starts up E-Sites, an Internet service, and leases office space in a building owned by Fred. The lease requires Dean to pay Fred a base rental of $250, plus 10 percent of E-Sites' profits, each month. The term is two years. Dean hires Gina to work at E-Sites' tech support desk at an hourly wage of $9.00, plus a commis?sion of 10 percent of the prof?its. The term is also two years.
-Refer to Fact Pattern 36-1A. Dean and Gina are

• A) not partners, because Gina does not have an ownership interest or manage?ment rights in E-Sites.
• B) not partners, because the pay includes an hourly wage.
• C) not partners, because the pay includes only 10 percent of the profits.
• D) partners in a partnership for two years.

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Definitions:

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent accounts and prepare the accounts for the next period.

Owner's Equity Statement

A financial statement that shows the changes in the equity of a company's owner(s) over a period of time.

Net Income

The amount of money that remains after all operating expenses, taxes, and interest have been deducted from total revenue.

Adjusted Trial Balance

A statement that lists all accounts and their balances after adjustments have been made, serving as the basis for preparing financial statements.